Growing demand for GLP-1 drugs like Ozempic and Wegovy and hospital consolidation could help drive up the cost of Affordable Care Act coverage next year by 9% or more, according to a preliminary review by the Peterson Center on Healthcare and KFF.
Why it matters:
While most enrollees in the market get subsidies and won’t have to foot the added bill, premium increases generally result in higher federal spending on subsidies, the analysis notes.
So, too, is the explosion in demand for drugsused for diabetes treatment and weight loss.
Though few ACA plans cover drugs that are approved only for weight loss, several insurers singled out GLP-1s as a driving force behind premium increases for 2025.
The analysis notes insurers are using strategies like prior authorization, step therapy and limiting quantities to control demand of Ozempic and other GLP-1s that are approved for diabetes but have potential for off-label use to lose weight.
Specialty drugs and biologics, including pricey gene therapies, are also becoming more prevalent and driving premiums upward.
Most insurers say ongoing state Medicaid redeterminations, COVID-19 treatment and tests and the federal surprise billing ban are not having a major effect on 2025 premiums.
Context:
Last year, insurers proposed rate increases for 2024 coverage that were between 2% and 10%, with a median increase of 6%, Peterson-KFF notes.
This year’s detailed review of factors driving premium changes for 2025 found insurers have somewhat higher proposed rate increases, with a median of 9%.
The basis for the federal subsidies is the percent change in the benchmark ACA silver plan.
The bottom line:
Medical inflation has picked up and now exceeds the growth of non-medical prices — a big change from 2021 to 2023. ACA plans are adjusting to keep pace and reflect their higher costs and overhead.
Medicare Advantage provides health coverage to more than half of the nation’s seniors, but some hospitals and health systems are opting to end their contracts with MA plans over administrative challenges.
Among the most commonly cited reasons are excessive prior authorization denial rates and slow payments from insurers.
In 2023, Becker’s began reporting on hospitals and health systems nationwide that dropped some or all of their Medicare Advantage contracts.
In January, the Healthcare Financial Management Association released a survey of 135 health system CFOs, which found that 16% of systems are planning to stop accepting one or more MA plans in the next two years. Another 45% said they are considering the same but have not made a final decision. The report also found that 62% of CFOs believe collecting from MA is “significantly more difficult” than it was two years ago.
Fifteen health systems dropping Medicare Advantage plans in 2024:
1. Canton, Ohio-based Aultman Health System‘s hospitals will no longer be in network with Humana Medicare Advantage after July 1, and its physicians will no longer be in network after Aug. 1.
3. Munster, Ind.-based Powers Health (formerly Community Healthcare System) went out of network with Humana and Aetna’s Medicare Advantage plans on June 1.
6. York, Pa.-based WellSpan Health stopped accepting Humana Medicare Advantage and UnitedHealthcare Medicare Advantage plans on Jan. 1. UnitedHealthcare D-SNP plans in some locations are still accepted.
7. Newark, Del.-based ChristianaCare is out of network with Humana’s Medicare Advantage plans as of Jan. 1, with the exception of home health services.
8. Greenville, N.C.-based ECU Health stopped accepting Humana’s Medicare Advantage plans in January.
9. Zanesville, Ohio-based Genesis Healthcare System dropped Anthem BCBS and Humana Medicare Advantage plans in January.
10. Corvallis, Ore.-based Samaritan Health Services’ hospitals went out of network with UnitedHealthcare’s Medicare Advantage plans on Jan. 9. Samaritan’s physicians and provider services will be out of network on Nov. 1.
The Affordable Care Act turned 14 on March 23. It has done a lot of good for a lot of people, but big changes in the law are urgently needed to address some very big misses and consequences I don’t believe most proponents of the law intended or expected.
At the top of the list of needed reforms: restraining the power and influence of the rapidly growing corporations that are siphoning more and more money from federal and state governments – and our personal bank accounts – to enrich their executives and shareholders.
I was among many advocates who supported the ACA’s passage, despite the law’s ultimate shortcomings. It broadened access to health insurance, both through government subsidies to help people pay their premiums and by banning prevalent industry practices that had made it impossible for millions of American families to buy coverage at any price. It’s important to remember that before the ACA, insurers routinely refused to sell policies to a third or more applicants because of a long list of “preexisting conditions” – from acne and heart disease to simply being overweight – and frequently rescinded coverage when policyholders were diagnosed with cancer and other diseases.
While insurance company executives were publicly critical of the law, they quickly took advantage of loopholes (many of which their lobbyists created) that would allow them to reap windfall profits in the years ahead – and they have, as you’ll see below.
I wrote and spoke frequently as an industry whistleblower about what I thought Congress should know and do, perhaps most memorably in an interview with Bill Moyers. During my Congressional testimony in the months leading up to the final passage of the bill in 2010, I told lawmakers that if they passed it without a public option and acquiesced to industry demands, they might as well call it “The Health Insurance Industry Profit Protection and Enhancement Act.”
A health plan similar to Medicare that could have been a more affordable option for many of us almost happened, but at the last minute, the Senate was forced to strip the public option out of the bill at the insistence of Sen. Joe Lieberman (I-Connecticut), who died on March 27, 2024. The Senate did not have a single vote to spare as the final debate on the bill was approaching, and insurance industry lobbyists knew they could kill the public option if they could get just one of the bill’s supporters to oppose it. So they turned to Lieberman, a former Democrat who was Vice President Al Gore’s running mate in 2000 and who continued to caucus with Democrats. It worked. Lieberman wouldn’t even allow a vote on the bill if it created a public option. Among Lieberman’s constituents and campaign funders were insurance company executives who lived in or around Hartford, the insurance capital of the world. Lieberman would go on to be the founding chair of a political group called No Labels, which is trying to find someone to run as a third-party presidential candidate this year.
The work of Big Insurance and its army of lobbyists paid off as insurers had hoped. The demise of the public option was a driving force behind the record profits – and CEO pay – that we see in the industry today.
The good effects of the ACA:
Nearly 49 million U.S. residents (or 16%) were uninsured in 2010. The law has helped bring that down to 25.4 million, or 8.3% (although a large and growing number of Americans are now “functionally uninsured” because of unaffordable out-of-pocket requirements, which President Biden pledged to address in his recent State of the Union speech).
The ACA also made it illegal for insurers to refuse to sell coverage to people with preexisting conditions, which even included birth defects, or charge anyone more for their coverage based on their health status; it expanded Medicaid(in all but 10 states that still refuse to cover more low-income individuals and families); it allowed young people to stay on their families’ policies until they turn 26; and it required insurers to spend at least 80% of our premiums on the health care goods and services our doctors say we need (a well-intended provision of the law that insurers have figured out how to game).
The not-so-good effects of the ACA:
As taxpayers and health care consumers, we have paid a high price in many ways as health insurance companies have transformed themselves into massive money-making machines with tentacles reaching deep into health care delivery and taxpayers’ pockets.
To make policies affordable in the individual market, for example, the government agreed to subsidize premiums for the vast majority of people seeking coverage there, meaning billions of new dollars started flowing to private insurance companies. (It also allowed insurers to charge older Americans three times as much as they charge younger people for the same coverage.) Even more tax dollars have been sent to insurers as part of the Medicaid expansion. That’s because private insurers over the years have persuaded most states to turn their Medicaid programs over to them to administer.
We invite you to take a look at how the ascendency of health insurers over the past several years has made a few shareholders and executives much richer while the rest of us struggle despite – and in some cases because of – the Affordable Care Act.
BY THE NUMBERS
In 2010, we as a nation spent $2.6 trillion on health care. This year we will spend almost twice as much – an estimated $4.9 trillion, much of it out of our own pockets even with insurance.
In 2010, the average cost of a family health insurance policy through an employer was $13,710. Last year, the average was nearly $24,000, a 75% increase.
The ACA, to its credit, set an annual maximum on how much those of us with insurance have to pay before our coverage kicks in, but, at the insurance industry’s insistence, it goes up every year. When that limit went into effect in 2014, it was $12,700 for a family. This year, it has increased by 48%, to $18,900. That means insurers can get away with paying fewer claims than they once did, and many families have to empty their bank accounts when a family member gets sick or injured. Most people don’t reach that limit, but even a few hundred dollars is more than many families have on hand to cover deductibles and other out-of-pocket requirements. Now 100 million Americans – nearly one of every three of us – are mired in medical debt, even though almost 92% of us are presumably “covered.” The coverage just isn’t as adequate as it used to be or needs to be.
Meanwhile, insurance companies had a gangbuster 2023. The seven big for-profit U.S. health insurers’ revenues reached $1.39 trillion, and profits totaled a whopping $70.7 billion last year.
SWEEPING CHANGE, CONSOLIDATION–AND HUGE PROFITS FOR INVESTORS
Insurance company shareholders and executives have become much wealthier as the stock prices of the seven big for-profit corporations that control the health insurance market have skyrocketed.
NOTE: The Dow Jones Industrial Average is listed on this chart as a reference because it is a leading stock market index that tracks 30 of the largest publicly traded companies in the United States.
REVENUES collected by those seven companies have more than tripled (up 346%), increasing by more than $1 trillion in just the past ten years.
PROFITS (earnings from operations) have more than doubled (up 211%), increasing by more than $48 billion.
The CEOs of these companies are among the highest paid in the country. In 2022, the most recent year the companies have reported executive compensation, they collectively made $136.5 million.
U.S. HEALTH PLAN ENROLLMENT
Enrollment in the companies’ health plans is a mix of “commercial” policies they sell to individuals and families and that they manage for “plan sponsors” – primarily employers and unions – and government/enrollee-financed plans (Medicare, Medicaid, Tricare for military personnel and their dependents and the Federal Employee Health Benefits program).
Enrollment in their commercial plans grew by just 7.65% over the 10 years and declined significantly at UnitedHealth, CVS/Aetna and Humana. Centene and Molina picked up commercial enrollees through their participation in several ACA (Obamacare) markets in which most enrollees qualify for federal premium subsidies paid directly to insurers.
While not growing substantially, commercial plans remain very profitable because insurers charge considerably more in premiums now than a decade ago.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2) Humana announced last year it is exiting the commercial health insurance business. (3) Enrollment in the ACA’s marketplace plans account for all of Molina’s commercial business.
By contrast, enrollment in the government-financed Medicaid and Medicare Advantage programs has increased 197% and 167%, respectively, over the past 10 years.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS.
Of the 65.9 million people eligible for Medicare at the beginning of 2024, 33 million, slightly more than half, enrolled in a private Medicare Advantage plan operated by either a nonprofit or for-profit health insurer, but, increasingly, three of the big for-profits grabbed most new enrollees.
Of the 1.7 million new Medicare Advantage enrollees this year, 86% were captured by UnitedHealth, Humana and Aetna.
Those three companies are the leaders in the Medicare Advantage business among the for-profit companies, and, according to the health care consulting firm Chartis, are taking over the program “at breakneck speed.”
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2,3) Centene’s and Molina’s totals include Medicare Supplement; they do not break out enrollment in the two Medicare categories separately.
It is worth noting that although four companies saw growth in their Medicare Supplement enrollment over the decade, enrollment in Medicare Supplement policies has been declining in more recent years as insurers have attracted more seniors and disabled people into their Medicare Advantage plans.
OTHER FEDERAL PROGRAMS
In addition to the above categories, Humana and Centene have significant enrollment in Tricare, the government-financed program for the military. Humana reported 6 million military enrollees in 2023, up from 3.1 million in 2013. Centene reported 2.8 million in 2023. It did not report any military enrollment in 2013.
Elevance reported having 1.6 million enrollees in the Federal Employees Health Benefits Program in 2023, up from 1.5 million in 2013. That total is included in the commercial enrollment category above.
At Cigna, Express Scripts’ pharmacy operations now contribute more than 70% to the company’s total revenues. Caremark’s pharmacy operations contribute 33% to CVS/Aetna’s total revenues, and Optum Rx contributes 31% to UnitedHealth’s total revenues.
WHAT TO DO AND WHERE TO START
The official name of the ACA is the Patient Protection and Affordable Care Act. The law did indeed implement many important patient protections, and it made coverage more affordable for many Americans.
But there is much more Congress and regulators must do to close the loopholes and dismantle the barriers erected by big insurers that enable them to pad their bottom lines and reward shareholders while making health care increasingly unaffordable and inaccessible for many of us.
Several bipartisan bills have been introduced in Congress to change how big insurers do business. They include curbing insurers’ use of prior authorization, which often leads to denials and delays of care; requiring PBMs to be more “transparent” in how they do business and banning practices many PBMs use to boost profits, including spread pricing, which contributes to windfall profits; and overhauling the Medicare Advantage program by instituting a broad array of consumer and patient protections and eliminating the massive overpayments to insurers.
And as noted above, President Biden has asked Congress to broaden the recently enacted $2,000-a-year cap on prescription drugs to apply to people with private insurance, not just Medicare beneficiaries. That one policy change could save an untold number of lives and help keep millions of families out of medical debt. (A coalition of more than 70 organizations and businesses, which I lead, supports that, although we’re also calling on Congress to reduce the current overall annual out-of-pocket maximum to no more than $5,000.)
I encourage you to tell your members of Congress and the Biden administration that you support these reforms as well as improving, strengthening and expanding traditional Medicare. You can be certain the insurance industry and its allies are trying to keep any reforms that might shrink profit margins from becoming law.
In 46 states, once you choose Medicare Advantage at 65, you can almost never leave.
Medicare was founded in 1965 to end the crisis of medical care being denied to senior citizens in America, but private insurers have been able to progressively expand their presence in Medicare.
One of the biggest selling points of Obamacare was that it would finally end discrimination against patients on the basis of pre-existing conditions.
But for one vulnerable sector of the population, that discrimination never ended. Insurers are still able to deny coverage to some Americans with pre-existing conditions. And it’s all perfectly legal.
Sixty-five million seniors are in Medicare open enrollment from October 15 until December 7. Nearly 32 million of those patients are enrolled in Medicare Advantage, a set of privately run plans that have come under fire for denying treatment and overbilling the government.
Medicare Advantage patients theoretically have the option to return to traditional Medicare. But in 46 states, it is nearly impossible for those people to do so without exposing themselves to great financial risk.
Traditional Medicare has no out-of-pocket cap and covers 80 percent of medical expenses. Unlike Medicare Advantage plans, in traditional Medicare, seniors can choose whatever provider they want, and coverage limitations are far less stringent. Consequently, there’s a huge upside to going with traditional Medicare, and the downside is mitigated by the purchase of a Medigap plan, which covers the other 20 percent that Medicare doesn’t pay.
While this coverage is more expensive than most Medicare Advantage plans, nearly everybody in their old age would like to be able to choose their doctor and their hospitals, and everybody would want the security of knowing that they won’t be denied critical treatments. In 46 states, however, Medigap plans are allowed to engage in what’s called underwriting, or medical health screening, after seniors have already chosen a Medicare Advantage plan at age 65.
Only four states—New York, Connecticut, Maine, and Massachusetts—prevent Medigap underwriting for Medicare Advantage patients trying to switch back to traditional Medicare. The millions of Americans not living in those states are trapped in Medicare Advantage, because Medigap plans are legally able to deny them insurance coverage.
Medicare Advantage little resembles Medicare as it was traditionally intended, with tight networks and exorbitant costs that threaten to bankrupt the Medicare trust fund. (A recent estimate from Physicians for a National Health Program found that the program costs Medicare $140 billion annually.)
Jenn Coffey, a former EMT in New Hampshire who has been a vocal critic of her Medicare Advantage insurers’ attempts to deny her needed care, told the Prospect that she would jump back to traditional Medicare in a second. But because she became eligible prior to turning 65 due to a disability, she never had the option to pursue traditional Medicare with a Medigap plan. Instead, she pays premiums for a Medicare Advantage plan that nearly mirror what the cost of Medigap would be. But New Hampshire, like most other states, allows Medigap plans to reject her.
“I tried to find out if I could switch to traditional Medicare,” said Coffey. “When I talked to an insurance broker they said that I could. I made an appointment with an insurance agent, who then started looking at my pre-existing conditions, and they said, ‘We’re never going to get somebody to underwrite you.’”
Coffey was stunned by the agent’s words. “I honestly thought that we were completely done with pre-existing conditions” as a determinant for insurance coverage, she said. “Medigap plans are the only place where they are allowed to discriminate against us.”
Medicare Advantage now covers a majority of Medicare participants, thanks to extremely aggressive marketing and perks for healthier seniors like gym memberships.
In the 46 states that lack protections for people with pre-existing conditions, “lots of people don’t know that they may not be able to buy a Medigap plan if they go back to traditional Medicare from Medicare Advantage,” said Tricia Neuman, a senior vice president at KFF who has studied this particular issue.
Technically speaking, they can still go back to traditional Medicare if they don’t like their Medicare Advantage options, Neuman explained. But without access to a Medigap plan, they would be on the hook for 20 percent of their medical costs, which is unaffordable for most seniors.
Neuman told the Prospect about “cases where people have serious medical problems, and wanted to see a specialist,” but were blocked by their Medicare Advantage plan. Those same people had no ability to switch to traditional Medicare with a Medigap plan at precisely the time they need it the most, in nearly every state in the U.S.
“Medigap wasn’t a part of the ACA discussion on pre-existing conditions,” Neuman added. “A lot of people have no idea about this restriction on Medicare coverage, until they find themselves in a position that they want to go back and then it could be too late.”
Academic research shows that seniors often seek to return to traditional Medicare when they become sick.
The critical component that both Medigap and Medicare Advantage plans offer, which traditional Medicare does not, is out-of-pocket caps, said Cristina Boccuti, a director at the West Health Policy Center. “People who want to leave their Medicare Advantage plan, maybe because they are experiencing problems in their plan’s network, decide to disenroll and can’t obtain an out-of-pocket limit which they had previously had in Medicare Advantage,” Boccuti said.
That’s exactly the problem facing Rick Timmins, a retired veterinarian in Washington state. When Timmins was continually delayed care for melanoma, he explored getting out of his Medicare Advantage plan. “I wanted out of Medicare Advantage big-time,” said Timmins. But when he began to look at Medigap plans, he was told that he wouldn’t be guaranteed to get a plan, and that the insurance company could raise premiums based on a pre-existing condition.
“I doubt that I’ll be able to switch over to traditional Medicare, as I can’t afford high premiums,” Timmins said. “I’m still paying off some old medical debt, so it adds to my medical expenses.”
Medicare was founded in 1965 to end the crisis of medical care being denied to senior citizens in America. “No longer will older Americans be denied the healing miracle of modern medicine,” Lyndon Johnson said at the time. “No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts.”
But slowly, private insurers were able to progressively expand their presence in Medicare, with a colossal advance made through George W. Bush’s Medicare prescription drug program in 2003. Now, Medicare Advantage covers a majority of Medicare participants, thanks to extremely aggressive marketing and perks for healthier seniors like gym memberships.
Numerous recent studies have shown Medicare Advantage plans to deny care while boosting the profits of private insurance companies. Defenders of Medicare Advantage argue that managed care—which practically speaking means insurance employees denying care to seniors—improves our health care system.
Denial-of-care issues,
combined with the aforementioned $140 billion drain on the trust fund, have attracted far more scrutiny of the program than in years past. Community organizations like People’s Action, along with other groups like Be A Hero, have stepped up their criticism of the program. The Biden administration proposed new rules this year to curb overbilling through the use of medical codes, but a furious multimillion-dollar lobbying campaign from the health insurance industry led to the rules being implemented gradually.
Still, members of Congress have become more emboldened to speak out against abuses in Medicare Advantage. A recent Senate Finance Committee hearing featured bipartisan complaints about denying access to care. And House Democrats have urged the Centers for Medicare & Medicaid Services to crack down on increases in prior authorizations for certain medical procedures, as well as the use of artificial-intelligence programs to drive denials.
Megan Essaheb, People’s Action’s director of federal affairs, said that Medicare Advantage has become a drain on the federal trust fund. “These private companies are making tons of money,” Essaheb said. “The plans offer benefits on the front end without people understanding that they will not get the benefits of traditional Medicare, like being able to choose your doctor.”
Despite the growing scrutiny, the trapping of patients who want to get out of Medicare Advantage hasn’t gotten as much attention from either Congress or state legislatures that could end the practice.
Coffey, the retired EMT from New Hampshire, told the Prospect that she has paid $6,000 in out-of-pocket expenses this year under a Medicare Advantage program. “If I could go to Medigap, I would have better access to care, I wouldn’t be forced to give up Boston doctors,” she said.
“These insurance companies are allowed to reap as much profit as possible for as little service as they can get away with. They pocket all of our money and they don’t pay for anything, they sit there and deny and delay.”
Physicians for a National Health Program estimate nearly 12 million seniors are in a Medicare Advantage plan that excludes more than 70% of doctors in their county.
Negative stories about Medicare Advantage (MA) insurers are finally making it to mainstream media after percolating below the surface for years. More and more patients, physicians, and even health care executives are speaking up about the disastrous expansion of this program. Shockingly, some of these stories have come from the insurance companies themselves.
With no hint of shame or irony, executives like CFO Thomas Cowhey of CVS Health have delivered lines such as “The goal next year is margin over membership,” making explicit that more money is their mantra. With all these reports of limited networks, care denials, delayed payments, and corporate greed, you may feel like the story of MA can’t get any worse.
Impossibly, it does. Physicians for a National Health Program (PNHP) has just recently released a bombshell report exposing the sheer breadth of harm that MA insurers have done to patients and health care workers across the country. The report combines policy analysis of dozens of academic studies, news reports, and government investigations with personal stories from people hurt by the insurance companies running these plans. We want to take some time to explore the report’s findings, and highly encourage you to read it in full as well.
Patients in MA experience difficulties from the moment they begin to seek care. By PNHP’s estimate, 11.7 million beneficiaries are in a plan that excludes more than 70% of doctors in their county. These narrow networks mean that patients often have to travel hours for an appointment, and can’t see their preferred family physician or the right specialist for their condition. This can have dire consequences.
One study found that cancer patients in MA are less likely to be treated at teaching hospitals, Commission on Cancer-accredited hospitals, or National Cancer Institute-designated centers. As a result, these patients suffer higher mortality rates following surgery for a number of kinds of cancer, with some cancer patients in MA plans being twice as likely to die as those in traditional Medicare.
Put simply, narrow networks designed to reap profits in MA are killing patients.
Even if they’re able to find the right doctor, getting care doesn’t become any easier. MA insurers almost always require prior authorization for standard, evidence-based tests, procedures, and treatments, making patients wait weeks or even months to get the life-saving care they need now.
In one story from the report, a physician recounts how damaging this practice can be:
I had a patient with several chronic diseases who was very sick and had just survived major abdominal surgery, almost miraculously. In the aftermath, she desperately needed to go to acute rehab, which is the most intensive rehab – we found a facility, she liked it, her family liked it, and then her MA plan looked at the place and said ‘No, she’s healthy enough to not go to acute rehab, we won’t authorize it.’ This was after our PM&R specialist, physical therapist, and 3 MDs on our team had told her she needed acute rehab, and that it was the only thing that would keep her out of the hospital again. And this insurer, without anyone ever looking at her, rejected that conclusion. And we knew that on traditional Medicare this never would’ve happened.
Prior authorization is also a gigantic waste of time and resources for doctors and health care workers who want to spend that time caring for patients. PNHP found that medical practices are forced to waste between 11.1 and 20.5 million hours per year filling out authorization forms and fighting with insurance companies to get necessary care approved.
Much of this is done arbitrarily, wearing patients down with bureaucracy so the insurance company doesn’t have to pay for treatment. When challenged on appeal, somewhere around 80% of denials are reversed, proving there was no good medical reason for the denial in the first place.
Assuming you can find a doctor in your narrow network, and that your doctor makes it through the red-tape nightmare to get your necessary care approved, you may then find yourself dealing with severely limited coverage and thousands of dollars in medical bills. In fact, 7.3 million beneficiaries in MA are considered underinsured based on their reporting of high health care costs. Seniors and people with disabilities are often enticed into MA by advertisements or insurance brokers who tout low premiums and supplemental benefits as big perks of their plans, only to find that once they actually become sick, coverage dries up fast.
After experiencing all of these hardships, many beneficiaries find themselves wanting to get out of MA and go to traditional Medicare, and studiesshow that those who are seriously ill or who have high health care costs indeed switch out of the program at high rates. Unfortunately, if you stay in MA too long, you may be trapped in the program for good.
For the first twelve months someone is in MA, they have a guarantee that no Medigap insurer can deny them a policy. However, once this period is up, this guarantee disappears in 46 of 50 states.
If you decide to switch back to traditional Medicare after a year, you are no longer guaranteed to receive this coverage, and you can be denied a policy on the basis of “pre-existing conditions,” a practice that most believe was fully outlawed following the passage of the Affordable Care Act.
Imagine you get sick while in MA, and rack up thousands of dollars in medical bills that you can’t pay. When you try to switch to traditional Medicare, you can be denied Medigap coverage because of the very illness that made you need to leave MA. Many people simply cannot afford Medicare without Medigap, meaning their only option is to stay in their MA plan.
If all of this seems crazy, that’s because it is. Medicare Advantage is a total rejection of the founding principles of Medicare and health care in general, and every harmful practice in this report is done in the name of profit. Restricting networks, denying care, refusing to cover costs–these are all ways that insurance companies in MA keep our taxpayer dollars while leaving patients and health care workers to deal with the consequences. We need to work together to get these greedy middlemen out of Medicare before they take it over entirely. Our hard-earned dollars should be going to traditional Medicare, the program that actually serves its constituents.
Abuses by payers are myriad, but these five areas could bear the most fruit for federal antitrust investigators.
Earlier this month, the U.S. Department of Justice announced it has haunched an investigation into “issues regarding payer-provider consolidation” along with other problems associated with mergers and acquisitions in health care. This is significant. For years Washington has trained its oversight authority on pharmaceutical manufacturers, private equity investments in health care and, more recently, pharmacy benefits managers controlled by big insurers. This has held bad actors like Martin Skhreli and Steward Healthcare accountable. But, it has also let insurers grow ever larger, under the radar.
No longer.
This task force will specifically evaluate the following, as an example: “A health insurance company buys several medical practices that compete with each other. It also prohibits its medical practices from contracting with rival health insurance companies.” The government will also dig into “anticompetitive uses of health care data,” “preventing transparency,” “price fixing,” and other areas that could drag nefarious activities of insurers into the spotlight.
I applaud the Department of Justice’s continued focus on these issues, building on the Department’s action announced in February to begin an antitrust investigation into UnitedHealth Group. (If you haven’t read the piece we published in February on UnitedHealth’s self-dealing that helped lead DOJ to open that antitrust inquiry, you can do so here.) The following are a few areas of low-hanging fruit that I hope the task force will focus on as they consider the impact insurers’ ongoing vertical integration has had on the overall health care system.
1. Insurers purchasing physician practices
Once a low-profile issue, Congress and the Biden administration alike have increasingly turned their focus to insurance companies – often referred to as payers – that now own and operate physician practices and clinics – those being paid. Even for someone without a law degree, it is easy to see the conflict this creates, particularly at scale.
There is the oft-cited statistic that UnitedHealth has said that through its Optum division, the company employs or otherwise controls about 10 percent of doctors in the U.S. – around 130,000 physicians and other practitioners in 16 states. This prompted me to take a closer look at publicly available information on the number of doctors employed by other insurers to get a better handle on how much control of physician practices payers now have.
It is difficult to put a percentage on physicians employed by each insurer, but it is clear that the others are following UnitedHealth’s lead. CVS/Aetna purchased Signify Health in 2023, adding 10,000 clinicians to its portfolio. The company says it supports “more than 40,000 physicians, pharmacists, nurses and nurse practitioners.”
Clearly taking a page out of UnitedHealth’s playbook, Elevance (formerly Anthem), which owns Blue Cross Blue Shield plans in 14 states announced last month a “strategic partnership” with 900 providers across several states. Elevance did not disclose the terms of the deal except to say it, “will primarily be through a combination of cash and our equity interest in certain care delivery and enablement assets of Carelon Health.”
As insurers have acquired physician practices, they also have created a rinse-and-repeat strategy associated with kicking physicians they don’t own out of network, and in some cases targeting those same practices for acquisition. Aetna and Humana recently told investors they will be reviewing their networks of physicians, signaling they’ll soon be further narrowing their networks. A good question for this task force: when insurers review those contracts with doctors, do they ever kick the doctors they employ out of network? (Doubtful.) This could specifically draw attention from the task force’s focus on “health care contract language and other practices that restrict competition,” such as contract provisions that require or encourage patients to seek care from doctors directly employed or closely controlled by patients’ insurers.
Additionally, UnitedHealth CEO Andrew Witty recently told analysts, “As I think you see some of the funding changes play out across the — across the next few years, I suspect that may also create new opportunities for us as different companies assess their positions.” My translation:UnitedHealth’s burdensome business practices and the way it shortchanges doctors (those “funding changes” he referenced) contribute to the financial distress that is forcing many health care providers to “assess their positions.”
As the task force continues to consider the impact of private equity in health care monopolies, transactions like this one should receive equal consideration for their lack of transparency and overall impact on market consolidation.
2. Co-mingling of middlemen
I have watched with interest for over the past year as both Democrats and Republicans in Washington increasingly trained their fire on pharmacy benefit managers. The natural next area of focus in that space, which this new task force could advance, should be around how the
three PBMs that control 80 percent of market share are all combined with health insurance companies – namely CVS/Aetna (Caremark), UnitedHealth (Optum Rx), and Cigna (Express Scripts).
An important, and politically popular, area where this consolidation has played out is in the squeeze placed on small, independent pharmacists across the country. More than 300 community pharmacies have closed in the past year alone, out of an inability to operate or push back on unfair margins pushed by these PBM-insurer monopolies. As we have written here, the fees these PBMs charge have increased more than 100,000 percent over the past decade, and are quietly contributing significantly to the profits of the largest health insurers.
We still have little insight into how these business lines interact with each other, and the ultimate impact that has on patients. Given the enormous influence just three insurance companies have over what prescriptions Americans can receive, and how much should be paid for each prescription, the task force would do well to focus on what insurers and PBMs are doing behind the scenes to maximize profits and limit patient access to prescription drugs. It’s already gaining traction on Capitol Hill, with one Congressman recently saying, “I’ll continue to bust this up … this vertical integration in health care.”
3. Prior authorization requests
CVS/Aetna shares were hammered after the company reported a significant increase in payment of Medicare Advantage claims during the first three month is of this year. Expect all insurers to notice. And as they have seen their forecasts fall short of Wall Street’s expectations – particularly because of increasing scrutiny in Washington of Medicare Advantage – these corporations will look to increase their already aggressive use of prior authorization to limit claims payments.
It is not as though insurers make seeking the care you need easy. Far from it. Prior authorization has become “medical injustice disguised as paperwork,” as the New York Times said in a recent, excellent video detailing the widespread nature of this profiteering practice.
While not a stated direct focus of this task force, the increased impact of prior authorization in care delivery is a direct outgrowth of a few large health insurers effectively controlling the marketplace. As insurers directly employ more doctors and enroll more Americans in their plans, they can use prior authorization to increasingly determine whether a patient can get care, period.
Scrutiny in this space could add momentum to increasing activity in state legislatures and Washington to rein in excessive prior authorization. As of early March, nine states and the District of Columbia had passed bills to limit how far insurers could go with prior authorization. And earlier this year, the Centers for Medicare and Medicaid released a final rule that is expected to save physicians $15 billion over the next decade by putting limits on insurer prior authorization tactics.
4. Rising out-of-pocket costs
Regular readers of this newsletter know one of my crusades is to ensure folks who pay good money for health insurance – out of their paychecks or through their tax dollars – can use it when they need it. It was a big win earlier this year for the Lower Out of Pockets Now coalition (which I lead) when President Biden called for a cap on prescription drug out-of-pocket costs of $2,000 annually for everybody, not just Medicare beneficiaries.
If there was true competition and real consumer choice in health insurance, payers wouldn’t be able to get away with increasingly shifting patients into high-deductible plans. But the fact that a few big players control the health insurance market has allowed the oligopoly of payers to do just that, with ever-rising deductibles alongside ever-rising premiums.
The task force’s focus on price fixing, collusion, and transparency in health care costs will, I hope, include some focus on how insurers use their size and clout to drive up out-of-pocket costs and premiums simultaneously – with little recourse to employers or their employees.
5. Implementing crystal clear laws and rules in health care
You know you’re a monopoly or close to it when you can pretty much do whatever you want and get away with it. Look no further than America’s health insurance companies and implementation of the No Surprises Act.
As I wrote earlier this year, Congress and CMS have been clear about how out-of-network hospital bills should be negotiated between insurers and physicians. Yet in case after case, including many that have become the basis of lawsuits, insurers are clearly flouting the Act passed by Congress and the rules promulgated by CMS. Payers are doing this, doctors have said, simply because of their size and ability to weather criticism from physicians, regulators, and the courts – while doctors struggle to pay their bills with significant payments still owed pending out-of-network negotiations with insurers.
One would hope, at a minimum, this task force, focused on rooting out the ills of monopolies, would document how insurers are well aware of how they are supposed to implement legislation like the No Surprises Act, but flout it anyway.
I wrote Monday about how the additional Medicare claims CVS/Aetna paid during the first three months of this year prompted a massive selloff of the company’s shares, sending the stock price to a 15-year low.
During CVS’s May 1 call with investors, CEO Karen Lynch and CFO Thomas Cowhey assured them the company had already begun taking action to avoid paying more for care in the future than Wall Street found acceptable.
Among the solutions they mentioned:
Ratcheting up the process called prior authorization that results in delays and denials of coverage requests from physicians and hospitals; kicking doctors and hospitals out of its provider networks; hiking premiums; slashing benefits; and abandoning neighborhoods where the company can’t make as much money as investors demand.
On Tuesday at the Bank of America Securities Healthcare Conference, Cowhey doubled down on that commitment to shareholders and provided a little more color about what those actions would look like and how many human beings would be affected. As Modern Healthcare reported:
Headed into next year, Aetna may adjust benefits, tighten its prior authorization policies, reassess its provider networks and exit markets, CVS Chief Financial Officer Tom Cowhey told investors. It will also reevaluate vision, dental, flexible spending cards, fitness and transportation benefits, he said. Aetna is also working with its employer Medicare Advantage customers on how to appropriately price their business, he said.
Could we lose up to 10% of our existing Medicare members next year? That’s entirely possible, and that’s OK because we need to get this business back on track,” Cowhey said.
Insurers use the word “members” to refer to people enrolled in their health plans. You can apply for “membership” and pay your dues (premiums), but insurers ultimately decide whether you can stay in their clubs. If they think you’re making too many trips to the club’s buffet or selecting the most expensive items, your membership can–and will–be revoked.
That mention of “employer Medicare Advantage customers” stood out to me and should be of concern to people like New York Mayor Eric Adams, who was sold on the promise that the city could save millions by forcing municipal retirees out of traditional Medicare and into an Aetna Medicare Advantage plan. A significant percentage of Aetna’s Medicare Advantage “membership” includes people who retired from employers that cut a deal with Aetna and other insurers to provide retirees with access to care. Despite ongoing protests from thousands of city retirees, Adams has pressed ahead with the forced migration of retirees to Aetna’s club. He and the city’s taxpayers will find out soon that Aetna will insist on renegotiating the deal.
Back to that 10%. Aetna now has about 4.2 million Medicare Advantage “members,” but it has decided that around 420,000 of those human beings must be cut loose. Keep in mind that those humans are not among the most Internet-savvy and knowledgeable of the bewildering world of health insurance. Many of them have physical and mental impairments. They will be cast to the other wolves in the Medicare Advantage business.
Welcome to a world in which Wall Street increasingly calls the shots and decides which health insurance clubs you can apply to and whether those clubs will allow you to get the tests, treatments and medications you need to see another sunrise.
As Modern Healthcare noted, Aetna is not alone in tightening the screws on its Medicare Advantage members and setting many of them adrift. Humana, which has also greatly disappointed Wall Street because of higher-than-expected health care “utilization,” told investors it would be taking the same actions as Aetna.
But Aetna in particular has a history of ruthlessly cutting ties with humans who become a drain on profits. As I wrote in Deadly Spin in 2010:
Aetna was so aggressive in getting rid of accounts it no longer wanted after a string of acquisitions in the 1990s that it shed 8 million (yes, 8 million) enrollees over the course of a few years. The Wall Street Journal reported in 2004 that Aetna had spent more than $20 million to install new technology that enabled it “to identify and dump unprofitable corporate accounts.” Aetna’s investors rewarded the company by running up the stock price.
I added this later in the book:
One of my responsibilities at Cigna was to handle the communication of financial updates to the media, so I knew just how important it was for insurers not to disappoint investors with a rising MLR [medical loss ratio, the ratio of paid claims to revenues]. Even very profitable insurers can see sharp declines in their stock prices after admitting that they had failed to trim medical expenses as much as investors expected. Aetna’s stock price once fell more than 20% in a single day after executives disclosed that the company had spent slightly more on medical claims during the most recent quarter than in a previous period. The “sell alarm” was sounded when the company’s first quarter MLR increased to 79.4% from 77.9% the previous year.
I could always tell how busy my day was going to be when Cigna announced earnings by looking at the MLR numbers. If shareholders were disappointed, the stock price would almost certainly drop, and my phone would ring constantly with financial reporters wanting to know what went wrong.
May 1 was a deja-vu-all-over-again day for Aetna. You can be certain the company’s flacks had a terrible day–but not as terrible as the day coming soon for Aetna’s members when they try to use their membership cards.
Speaking of Lynch, one of the people commenting on the piece I wrote Monday suggested I might have been a bit too tough on Lynch, who I know and liked as a human being when we both worked at Cigna. The commenter wrote that:
After finishing Karen S. Lynch’s book, “Taking Up Space,” I came to the conclusion that she indeed has a very strong conscience and sense of responsibility, not totally to shareholders, but more importantly to the insured people under Aetna and the customers of CVS.”
I don’t doubt Karen Lynch is a good person, and I know she is someone whose rise to become arguably the business world’s most powerful woman was anything but easy, as the magazine for alumni of Boston College, her alma mater, noted in a profile of her last year. Quoting from a speech she delivered to CVS employees a few years earlier, Daniel McGinn wrote:
Lynch began with a story to illustrate why she was so passionate about health care. She described how she’d grown up on Cape Cod as the third of four children. Her parents’ relationship broke up when she was very young and her father disappeared, leaving her mom, Irene, a nurse who struggled with depression, as a single parent. In 1975, when Lynch was 12, Irene took her own life, leaving the four children effectively orphaned.
During her speech, several thousand employees listened in stunned silence as Lynch explained how her mom’s life might have turned out differently if she’d had access to better medical treatment, or if there’d been less stigma and shame about getting help for depression. She then talked about how an insurance company like Aetna could play a role in reducing that stigma, increasing access to care, and helping people live with mental illness.
I’m sure when she goes home at night these days, Lynch worries about what will happen to those 420,000 other humans who will soon be scrambling to get the care they need or to find another club that will take them. Their lives most definitely will turn out differently to appease the rich people who control her and the rest of us.
But she is stuck in a job whose real bosses–investors and Wall Street financial analysts–care far more about the MLR, earnings per share and profit margins than the fate of human beings less fortunate than they are.
“Incrementalism.” The word is perceived as the enemy of hope for universal health care in the United States.
Those who advocate for single-payer, expanded Medicare for all tend to be on the left side of the political spectrum, and we have advanced the movement while pushing back on incremental change. But the profit-taking health industry giants in what’s been called the medical-industrial complex are pursuing their own incremental agenda, designed to sustain the outrageously expensive and unfair status quo.
In recent years, as the financial sector of the U.S. economy has joined that unholy alliance, scholars have begun writing about the “financialization” of health care.
It has morphed into the medical-financial-industrial complex (MFIC) so vast and deeply entrenched in our economy that a single piece of legislation to achieve our goal–even with growing support in Congress–remains far short of enough votes to enact.
If we are to see the day when all Americans can access care without significant financial barriers, policy changes that move us closer to that goal must be pursued as aggressively as we fight against the changes that push universal health care into the distant future. Labeling all positive steps toward universal health care as unacceptable “incrementalism” could have the effect of aiding and abetting the MFIC and increase the chances of a worst-case scenario: Medicare Advantage for all, a goal of the giants in the private insurance business. But words matter. Instead of “incremental,” let’s call the essential positive steps forward as “foundational” and not undermine them.
The pandemic crisis exposed the weaknesses of our health system. When millions of emergencies in the form of COVID-19 infections overtook the system, most providers were ill-prepared and understaffed. More than 1.1 million U.S. citizens died of COVID-19-related illness, according to the Centers for Disease Control.
For years, the MFIC had been advancing its agenda, even as the U.S. was losing ground in life expectancy and major measures of health outcomes. While health care profits soared in the years leading up to and during the pandemic, those of us in the single-payer movement demanded improved, expanded Medicare for all. And we were right to do so. Progress came through almost every effort. The number of advocates grew, and more newly elected leaders supported a single-payer plan. Bernie Sanders’ 2016 presidential bid proved that millions of Americans were fed up with having to delay or avoid care altogether because it simply cost too much or because insurance companies refused to cover needed tests, treatments and medications.
But as the demand for systemic overhaul grew, the health care industry was making strategic political contributions and finding ways to gain even more control of health policy and the political process itself.
Over the years, many in the universal health care movement have opposed foundational change for strategic reasons. Some movement leaders believed that backing small changes or tweaks to the current system at best deflected from our ultimate goal. And when the Patient Protection and Affordable Care Act was passed, many on the left viewed it as a Band-Aid if not an outright gift to the MFIC. While many physicians in our movement knew that the law’s Medicaid expansion and the provisions making it illegal for insurers to refuse coverage to people with preexisting conditions would save many thousands of lives, they worried that the ACA would further empower big insurance companies. Both positions were valid.
After the passage of the ACA, more of us had insurance cards in our wallets and access to needed care for the first time, although high premiums and out-of-pocket costs have become insurmountable barriers for many. Meanwhile, industry profits soared.
The industry expanded its turf. Hospitals grew larger, stand-alone urgent care clinics, often owned by corporate conglomerates, opened on street corners in cities across the country, private insurance rolls grew, disease management schemes proliferated, and hospital and drug prices continued the march upward. The money flowing into the campaign coffers of political candidates made industry-favored incremental changes an easier lift.
To change this “system” would require an overhaul of the whole economy. Single-payer advocates must consider that herculean task as they continue their work. We must understand that the true system of universal health care we envision would also disrupt the financial industry – banks, collection agencies, investors – an often-forgotten but extraordinarily powerful segment of the corporate-run complex.
Even if the research and data show that improved, expanded Medicare for all would save money and lives (and they do show that), that is not motivating for the finance folks, who fear that without unfettered control of health care, they might profit less. Eliminating medical bills and debt would be marvelous for patients but not for a large segment of the financial community, including bankruptcy attorneys.
Following the money in U.S. health care means understanding how deep and far the tentacles of profit reach, and how embedded they are now.
We know the MFIC positioned itself to continue growing profits and building more capacity. The industry made steady, incremental progress toward that goal. There is no illusion that better overall health for Americans is the mission of the stockholders who drive this industry. No matter what the marketers tell us, patients are not their priority. If too many of us get healthier, we might not use as much care and generate as much money for the owners and providers. Private insurers want enough premiums and government perks to keep flowing their way to keep the C-Suite and Wall Street happy.
More than health insurers
Health insurers are far from the only rapidly expanding component of the MFIC. A recent documentary, “American Hospitals: Healing a Broken System,” for example, explores a segment of the U.S. health industry that is often overlooked by policymakers and the media. Though they were unprepared for the national health crisis, hospitals endured the pandemic in this country largely because the dedicated doctors, nurses and ancillary staff risked their own lives to keep caring for COVID-19 patients while everything from masks, gowns and gloves to thermometers and respirators were in short supply. But make no mistake, many hospitals were still making money through the pandemic. In fact, some boosted their already high profits, and private insurance companies had practically found profit-making nirvana. Patients put off everything from colonoscopies to knee replacements, physical therapy to MRIs. Procedures not done meant claims not submitted, while monthly insurance premiums kept right on coming and right on increasing.
The pandemic was a time of turmoil for most businesses and families, yet the MFIC took its share of profits. It was pure gold for many hospitals until staffing pressures and supply issues grew more dire, COVID patients were still in need of care, and more general patient care needs started to reemerge.
We might be forgiven for thinking there wasn’t much regulating or legislating done around health care during the pandemic years. We’d be wrong. There was a flurry of legislation at the state level as some states took on the abuses of the private insurance industry and hospital billing practices.
And the movement to improve and expand traditional Medicare to cover all of us stayed active, though somewhat muted. The bills before Congress that expanded access to Medicaid during the pandemic through a continuous enrollment provision offered access to care for millions of people. Yet as that COVID-era expansion ended, many of those patients were left without coverage or access to care. This might have been a chance to raise the issue loudly, but the social justice movement did not sufficiently activate national support for maintaining continuous enrollment in Medicaid. Is that the kind of foundational change worth fighting for? I would argue it most certainly is.
As those previously covered by Medicaid enter this “unwinding” phase, many will be unable to secure equivalent or adequate health insurance coverage. The money folks began to worry as coverage waned. After all, sick people will show up needing care and they will not be able to pay for it. As of this writing, patient advocacy groups are largely on the sidelines.
But Allina Health took action. The hospital chain announced it would no longer treat patients with medical debt. After days of negative press, the company did an about-face.
Throughout the country, even as the pandemic loomed, the universal, single-payer movement focused on explaining to candidates and elected officials why improving and expanding Medicare to cover all of us not only is a moral imperative but also makes economic sense. In many ways, the movement has been tremendously effective: More than 130 city and county governing bodies have passed resolutions in support of Medicare for all, including in Seattle, Denver, Cincinnati, Washington, D.C., Tampa, Sacramento, Los Angeles, St. Louis, Atlanta, Duluth, Baltimore, and Cook County (Chicago).
The Medicare for All Act, sponsored by Rep Pramila Jayapal (D-Wash.) and Sanders (I-Vt.) has 113 co-sponsors in the House and 14 in the Senate. Another bill allowing states to establish their own universal health care programs has been introduced in the House and will be introduced soon in the Senate.
Moving us closer
The late Dr. Quentin Young was a young Barack Obama’s doctor in Chicago. Young spoke to his president-in-the-making patient about universal health care and Obama, then a state legislator, famously answered that he would support a single-payer plan if we were starting from scratch. Many in the Medicare–for-all movement dismissed that statement as accepting corporate control of health care.
But Young would steadfastly advocate for single-payer health care for years to come and as one of the founding forces behind Physicians for a National Health Program. Once Dr. Young was asked if the movement should support incremental changes. He answered, “If a measure makes it easier and moves us closer to achieving health care for all of us, we should support that wholeheartedly. And if a measure makes it harder to get to single-payer, we need to oppose it and work to defeat that measure.” Many people liked that response. Others were not persuaded.
But in recent years, PHNP has become a national leader in a broad-based effort to halt the privatization of Medicare through so-called Medicare Advantage plans and other means. A case can be made that those are incremental/foundational but essential steps to achieving the ultimate goal.
We must fight incrementally sometimes, for instance when traditional Medicare is threatened with further privatization. Bit by painful bit, a program that has served this nation so well for more than 50 years will be carved up and given over to the private insurance industry unless the foundational steps taken by the industry are met with resistance and facts at every turn. We can achieve our goal by playing the short game as well as the long game. Foundational change can be and has been powerful. It just has to be focused on the health and well-being of every person.
ALSO: We’re premiering our Magic Translation Box to help you decipher corporate jargon and understand what’s coming down the pike.
If you are enrolled in an Aetna Medicare Advantage plan, now might be a good time to get more nervous than usual.
Wall Street is not happy with Aetna’s parent, CVS Health. In response to that unhappiness, triggered by the company’s admission that it has been paying more claims than usual, CVS execs have promised to do whatever it takes to get profit margins back to a level investors deem suitable.
That means the odds have increased that Aetna will refuse to cover the treatments and medications your doctor says you need. It also means CVS/Aetna likely will increase your premiums next year and might dump you altogether. The company has a long history of doing just that, as you’ll see below.
Medicare Advantage companies in general are facing what Wall Street financial analysts call headwinds, and those winds are now coming from several sources: increased Congressional scrutiny of insurers’ business practices, Biden administration efforts to end years of overpayments that have cost taxpayers hundreds of billions of dollars, enrollee discontent, and a gathering storm of negative press.
To understand the pressures CVS CEO Karen Lynch and her C-Suite team are under to satisfy the company’s remaining shareholders (many have fled), you need to know and understand what they told them in recent weeks–and what she undoubtedly will have to say again, with conviction, this coming Thursday when CVS holds its annual meeting of shareholders. You can be certain Lynch’s staff has prepared a binder chock full of the rudest questions she could face from rich folks (mostly institutional investors) who’ve become a little less rich in recent months as the golden calf calf called Medicare Advantage has lost some of its luster. (My former colleagues and I used to put together such a CEO-briefing binder during my Cigna days, which coincided with Lynch’s years at Cigna.)
To help with that understanding, we’re introducing the HEALTH CARE un-covered Magic Translation Box (MTB). We’ll fire it up occasionally to decipher the coded language executives use when they have to deal with analysts and investors in a public setting. We’ll start with what Lynch and her team told analysts on May 1 when CVS announced first-quarter 2024 results that caused a stampede at the New York Stock Exchange.
Lynch: We recently received the final 2025 (Medicare Advantage) rate notice (from the Center for Medicare and Medicaid Services), and when combined with the Part D changes prescribed by the Inflation Reduction Act, we believe the rate is insufficient. This update will result in significant added disruption to benefit levels and choice for seniors across the country. While we strive to deliver benefit stability to seniors, we will be adjusting plan-level benefits and exiting counties as we construct our bid for 2025. We are committed to improving margins.
Magic Translation Box: Can you believe it? CMS did not bend to industry pressure to pay MA plans what we demanded for next year. We only got a modest increase, not enough, in our opinion, to protect our profit margins. To make matters worse, starting next year we won’t be able to make people enrolled in Medicare prescription drug plans (Part D) pay more than $2,000 out of their own pockets, thanks to the Inflation Reduction Act President Biden signed in 2022. So, to make sure you, our most important stakeholder, once again have a good return on your investment, we will notify CMS next month that we will slash the value of Medicare Advantage plans by reducing or eliminating some benefits, like dental, hearing and vision, that attract people to MA plans in the first place. And, for good measure, we’ll be dumping Medicare Advantage enrollees who live in zip codes where we can’t make as much money as we’d like. For them: too bad, so sad. For you: more money in your bank account. And for extra good measure, to keep seniors from blaming greedy us for what we have in store for them, our industry will be bankrolling dark money ads to persuade voters that Biden and the Democrats are the bad guys cutting Medicare.
Later during CVS’s earnings call, CFO Thomas Cowhey reiterated Lynch’s remarks about reducing benefits.
Cowhey:So, we’ve given you all the pieces to kind of understand why we think it (Medicare Advantage) will lose a significant amount of money this year. But as you think about improvement there, obviously there’s a lot of work that we still need to do to understand what benefits we’re going to adjust and what ones we can and can’t…To the extent that we don’t believe we can credibly recapture margin in a reasonable period of time, we will exit those counties…(And) as we’ve all mentioned we’re going to be taking significant pricing actions and really it’s going to depend on what our competitors do.
Magic Translation Box: We’re under the gun to figure this out because we have to notify CMS by June 3 how much we will increase Medicare Advantage premiums and cut benefits next year and which counties we’ll abandon altogether. We’ll also be watching what our competitors do, but we know from what they’ve been telling you guys that they, too, will be dumping enrollees, hiking premiums and slashing benefits.
To make sure investors couldn’t miss what they were saying, Lynch jumped back into the conversation to make clear they knew they were #1 in her book:
Lynch: I’m just going to reiterate what I said in my prepared remarks. (You can bet what follows were prepared, too.) We are committed to improving margin in Medicare Advantage [emphasis added] and we will do so by pricing for the expected trends. We will do so by adjusting benefits and exiting service counties. And we are committed to doing that.
Magic Translation Box: Have I made myself clear? We will do whatever it takes to deliver the profits you expect. We will keep a closer eye on how much care people are trying to get and we’ll swing into action faster next time if we see evidence of an uptick. There will be carnage, but you guys rule. You mean a lot more to us than those old and disabled people who don’t have nearly as much money as you do in their bank accounts.
This will not be the first time Aetna has dumped health plan enrollees who were a drain on profits. In 2000, when Medicare Advantage was called Medicare+Choice, Aetna notified the Clinton administration it would stop offering Medicare plans in 14 states, affecting 355,000 people, more than half of Aetna’s total Medicare enrollment at the time. Other companies, including Cigna, did the same thing. My team and I wrote a press release to announce that Cigna would be bailing from almost all the markets where we sold private Medicare plans.
We of course blamed the federal government (i.e., the Democrats) for being the skinflints that made it necessary to bail. Our CEO at the time, Ed Hanway, said the government just couldn’t be relied upon to be a reliable “partner.”
Back then, just a relatively small percentage of Medicare beneficiaries were in private plans. Today, more than half of Medicare-eligible Americans are enrolled in a Medicare Advantage plan, which means the disruption could be much worse this time. Some people in counties where Aetna and other companies stop offering plans likely will not find a replacement plan with the same provider network, premiums and benefits.
But in most places, those who get dumped will be stuck in the volatile, often nightmarish Medicare Advantage world, unable to return to traditional Medicare and buy a Medicare supplement policy to cover their out-of-pocket obligations.
That’s because in all but a handful of states, seniors and disabled people will not be able to buy a Medicare supplement policy as cheaply as they could within six months of becoming eligible for Medicare benefits. After that, Medicare supplement insurers, including Aetna, get their underwriters involved. If your health isn’t excellent, expect to pay a king’s ransom for a Medigap policy.
HENRY KOTULA 